Third Quarter 2026 Market & Economic Commentary
The third quarter combined solid economic and corporate fundamentals with renewed pressure from oil and interest rates. Oil traded back above $100 per barrel, inflation remained elevated, Treasury yields moved higher, and the Federal Reserve raised rates in September. The S&P 500 traded higher and set a new all-time high as corporate earnings and economic activity remained strong, but beneath the headline gain, market leadership narrowed as smaller companies and rate-sensitive areas lagged. Meanwhile, artificial intelligence continued to play a large role in both the economy and financial markets.
In this commentary, we look at the forces pushing interest rates higher, the economic and earnings strength helping offset those pressures, and AI’s expanding influence on everyday borrowing costs, business investment, and the stock market.
Fed Raises Interest Rates as Oil Remains Volatile
Oil remained a key factor during the third quarter, with sharp price swings carrying implications for inflation, interest rates, and economic growth. After surging early in the year, oil fell sharply in May and June before reversing higher again in the third quarter, with a 22% increase in July. The main takeaway isn’t any single monthly move, but how frequently the direction changed.
Most of the volatility is tied to changing expectations for Middle East oil supplies and the uncertainty around the Strait of Hormuz and oil-related infrastructure. The swings in oil prices matter beyond the energy market because oil feeds into gasoline and transportation costs, inflation, and ultimately the outlook for interest rates and economic growth. When oil fell in the second quarter, some of those pressures eased. As prices moved higher in the third quarter, input costs rose, as did expectations for further inflation pressure.
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Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.
S&P 500 Index is a capitalization-weighted index calculated on a total return basis with dividends reinvested. The index includes 500 widely held U.S. market industrial, utility, transportation and financial companies.
Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
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